Hospital Outpatient Payments at Least 60 Percent Higher in States with Percent-of-Charge-Based Fee Regulations or No Fee Schedules, Finds WCRI Study

Cambridge, MA (WorkersCompensation.com) - Hospital outpatient payments were higher and growing faster in states with percent-of-charge-based fee regulations or no fee schedules, finds a study from the Workers Compensation Research Institute (WCRI). The study, the latest in an annual series, compares hospital payments for a group of common outpatient surgeries in workers’ compensation across 36 states from 2005 to 2017.

“Rising hospital costs continue to be a focus for public policymakers and system stakeholders in many states,” said Ramona Tanabe, WCRI’s executive vice president and counsel. “This study provides meaningful comparisons of hospital payments across states, as well as hospital payment trends in relation to reforms of hospital outpatient fee regulations.”

The study, Hospital Outpatient Payment Index: Interstate Variations and Policy Analysis, 8th Edition, found that hospital payments per surgical episode in states with percent-of-charge-based fee regulations were 67 to 212 percent higher than the median of the study states with fixed-amount fee schedules in 2017. In states with no fee schedules, it was 62 to 148 percent higher. WCRI also found that hospital outpatient payments per episode in most states with percent-of-charge-based fee regulations or no fee schedules grew faster than in states with fixed-amount fee schedules.

To put these reimbursement rates in perspective, the study provides a comparison between workers’ compensation hospital outpatient payments and Medicare rates for the most common group of surgical procedures across states. Medicare rates capture payments to hospital outpatient providers for similar services by a large payor other than workers’ compensation. Variation in the difference between average workers’ compensation payments and Medicare rates for a common group of procedures across states was even greater—reaching as low as 35 percent (or $1,961) below Medicare in Nevada and as high as 508 percent (or $23,020) above Medicare in Alabama.

The study also provides an analysis of major policy changes in states with recent fee schedule reforms. For example, on January 1, 2017, Kansas adopted a per-procedure-based fee schedule for hospital outpatient surgical services, while reimbursement for nonsurgical medical outpatient services remained subject to the charge-based fee regulation following the same tier approach. After the new fee schedule went into effect that year, hospital outpatient payments for common surgeries decreased by 8.4 percent, while the 27-state average growth rate was 8 percent.

This study captures payments for services provided and billed by hospitals; it excludes professional services billed by nonhospital medical providers (such as physicians, physical therapists, and chiropractors) and transactions for durable medical equipment and pharmaceuticals billed by providers other than hospitals. The analysis also excludes payments made to ambulatory surgery centers.

The 36 states included in this study are Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, West Virginia, and Wisconsin.

To download this study, visit WCRI’s website at https://www.wcrinet.org/reports/hosp-outpatient-payment-index-interstate-variations-policy-analysis-8th-ed. The authors of this study are Dr. Olesya Fomenko and Dr. Rebecca (Rui) Yang.

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